How projections used to establish appropriate loan covennant

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Question 1: How are projections used to establish appropriate loan covenants?

Option 1: Projections based on past performance are more realistic than future estimate when setting targeted financial ratios.

Option 2: Projections are the prediction of future cash flow that lenders rely upon to determine required insurance coverage to support a loan.

Option 3: Projections predict what will happen in the future, so the lender can require management to change business strategies.

Option 4: Projections can be used to establish mutually acceptable financial covenants with an agreed-upon range of projections.

Reference no: EM132568000

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